Duties of 1031 Exchange Facilitator
If the investor wants to do a 1031 Exchange and wants to reinvest the property for the tax deferment, then don't worry, our expert team is here at 1031property and will help you in finishing your 1031 exchange in the most reliable way. So, before opting for 1031 exchange, you should be aware of the concept of 1031 exchange, and who are the experts (also known as QI) in this field?
1031 Exchange in brief
1031 exchange evolved from section 1031 of the IRC (Internal Revenue Code). This is a great rule used for deferring the capital gain taxes. 1031 Exchange process allows the investor to sell the property and invest proceeds received from the sale to buy a new property. It allows the investor to suspend all the capital gains taxes within 180 days after the sale of the property. The 1031 exchange QI is also known as an accommodator, and the facilitator is involved in the process. The investor cannot complete the exchange without the involvement of the 1031 exchange QI. The proceeds received from the sale are kept in an escrow account, and the investor is not allowed to touch the cash. If they do so, they are disqualified from the exchange.
Prerequisite to serve as a Qualified Intermediary
1031 Exchange allows the investor to defer the capital gains taxes by directly selling the property with the involvement of QI. Section 1031 of the IRS says that neither your child, sibling, or your parents can be the middle person for the 1031 exchange. It prohibits anyone as your "agent," such as the investor's broker, CPA, real estate agent, or attorney from serving as your QI unless this person has not represented you within the past two years.
Responsibilities in a 1031 Exchange Facilitator
The QI, also known as an accommodator, plays an essential role in completing a successful 1031 exchange. The accommodator sells your property on behalf of the investor, buys the new replacement property, and then transfers the deed to the investor. It is the responsibility of the QI to hold the proceeds, prepare the legal documents, and completes the transaction within the IRS guidelines.
Duties of 1031 exchange QI
Here is the detailed explanation of the services performed by the Qualified Intermediary during the 1031 exchange process:
On the 1031 exchange process, QI coordinates with the investor and the advisor
QI has the responsibility of doing the documentation of the replacement property and the relinquished property.
Title organization concerning the exchange or to the escrow, the QI is responsible for providing a proper report.
QI has to deposit these funds into a separate insured account and had control over the funds from the exchange of the relinquished property.
the seller is not allowed to take the constructive receipt by the QI of the funds received from the sale of a property
During the identification period, QI holds the funds from the sale of the relinquished property, i.e., 45 days.
QI receives and holds all the written information about the potential replacement properties.